NY Gov. Hochul’s $227B budget plan: Money for asylum-seekers, schools, MTA and more

New York Gov. Kathy Hochul laid out a state budget proposal on Wednesday that would provide state money to help New York City resettle migrants, extend higher taxes on corporations and increase a payroll tax to help bolster the city’s public transit system.

Hochul, a Democrat, unveiled her $227 billion budget plan at the state Capitol, outlining her proposals to spend taxpayer money. The presentation kicked off at least two months of negotiations with state lawmakers ahead of the April 1 start of the state’s fiscal year.

As allowed by state law, Hochul’s budget includes dozens of wide-reaching policy proposals, including several she first laid out in her State of the State address earlier this month. That includes plans to tie future increases in the minimum wage to the rate of inflation, further changes to the state’s bail laws, as well as a housing strategy that could, in certain circumstances, allow the state to approve developments over local objections.

But the budget proposal answered a number of lingering questions Hochul had been facing, including whether she would extend a soon-to-expire tax on corporations — she would — and how she plans to plug the MTA’s budget hole.

“It’s a thoughtful plan that furthers our progressive values and our priorities as New Yorkers, but also ensures fiscal responsibility,” Hochul said during her budget address.

Here are five takeaways from Hochul’s budget proposal:

Money for resettling asylum-seekers in New York City

Since the spring, New York City has seen an influx of more than 42,000 migrants seeking shelter as they apply for asylum, according to New York City Mayor Eric Adams’ office. For months, Adams has been practically begging the federal and state governments to come up with more money to help the city out.

Hochul’s budget plan calls for about $1.1 billion in support in the coming year, with the bulk of that — $767 million — covering a share of the city’s costs for opening shelters and emergency response centers for asylum-seekers. (It’s the same 29% share the state picks up for the city’s existing shelters under the Safety Net Assistance program, according to Hochul.)

About $162 million of the remaining funding will go toward costs for continuing to deploy National Guard members to assist, while $137 million will go toward help the city with health care costs for migrants.

Also included is $6 million in direct funding for the newly opened 1,000-bed facility at the Brooklyn Cruise Terminal in Red Hook, which is at the center of an ongoing standoff with a group of asylum-seekers who refuse to take shelter there, calling it “inhumane.”

But the state funding won’t cover all of the migrant-related costs, and it’s unclear whether Adams is satisfied with the plan.

“The budget proposal is new,” Adams said on Wednesday. “It just came out. We’re analyzing it.”

Hochul is hoping to convince the federal, state and city governments to commit to a three-way split.

Funding the MTA with increased payroll tax, casino revenue

New York City may be getting more money for resettling migrants, but Hochul is also asking it to put up funding of its own to help fund the MTA.

Hochul has been facing questions for months about her plan to fill the MTA’s budget shortfall, caused in part by ridership that continues to trail pre-pandemic levels.

In her budget proposal, she provided an answer that would fundamentally shift how the transit authority is funded.

The governor wants to increase the MTA payroll tax, which applies to employers in the MTA’s service region, to raise $800 million a year for the transit authority. On top of that, she wants the state to provide an extra $300 million this year, with the city chipping in $500 million a year. The MTA, meanwhile, would be required to find and implement $400 million in “operating efficiencies” as part of the plan.

During her speech, Hochul said the decrease in riders has created a “new dynamic” for the MTA.

“That sustained decrease in ridership that we had hoped would pop back by now — we have to deal in realities,” she said. “It’s not there yet. I believe it’ll come back, but we’re not there yet.”

For future years, Hochul wants to provide the MTA with a chunk of revenue from casinos that are expected to be awarded licenses soon in the New York City area. That includes a share of the $1.5 billion in licensing fees, as well as at least $462 million in annual tax revenue, according to her budget briefing book.

Extending the (higher) corporate tax

Hochul had previously expressed resistance to increasing taxes in her budget. But in her proposal on Wednesday, she did get on board with extending a higher tax rate for wealthy corporations that had been set to expire at the end of the year.

In 2021, with the state facing a COVID-related cash crunch, lawmakers and then-Gov. Andrew Cuomo increased the tax rate for corporations taking in at least $5 million a year in revenue from 6.5% to 7.25%.

At the time, it was only supposed to be a temporary, three-year hike. Now, Hochul wants to extend that higher tax rate for another three years, a move that would bring in between $800 million and $1.1 billion annually. It wouldn’t expire until the end of 2026.

That position is likely to put her in line with many legislative Democrats, who want to see the tax rates continue — though some are pushing to make it permanent.

Personal income tax, meanwhile, won’t increase.

A big hike in school funding; lifting the charter school cap

Hochul is proposing a big increase in school funding. But she’s also hoping to relax the cap on New York City charter schools, a move that’s likely to put her at odds with progressive Democrats and the state teacher’s union.

The governor wants to boost the amount of aid provided to schools to $34.5 billion in the coming fiscal year, which would be an increase of about 10%, or $3.1 billion, according to her office.

That includes a $2.7 billion boost in Foundation Aid — a type of funding based on a formula that is meant to favor less wealthy districts in an attempt to make the process more equitable. It’s part of a commitment Hochul’s administration made in settling a lawsuit that faulted the state for never fully funding the aid program, despite creating it 17 years ago.

“This growth fully funds the formula for the first time in its history, marking the final year of the three-year phase-in and ensuring that each school district receives a minimum year-to-year increase of 3%,” Hochul’s budget book reads.

Hochul’s budget would alter the local New York City cap on charter schools, freeing up at least 85 that could be awarded in the five boroughs without lifting the statewide cap, which is set at 460.

Assembly Speaker Carl Heastie (D-Bronx) acknowledged his chamber has traditionally been wary of expanding charter schools, but he didn’t rule anything out.

“The Assembly’s focus has always been about trying to take care of the needs of the traditional public schools, but we’ll see,” he said.

Greasing housing development in NYC

Hochul’s executive budget sheds more light on her plans to supercharge housing development in New York City, a key part of her goal of developing 800,000 new homes statewide over the next decade. Proposed tax incentives and rule changes could ultimately ease residential conversions in various settings, from Midtown office towers to Midwood basements.

But with more 70,000 New Yorkers in homeless shelters and half of all tenants considered “rent-burdened,” she has yet to provide specifics on affordability levels.

Hochul has proposed a tax break for owners looking to turn their commercial buildings into housing, with rents capped in some units for low-income and middle-income New Yorkers.

For the second year in a row, she proposed lifting a restriction on residential floor area ratio, or FAR, which limits the size and density of apartment buildings in high-rise districts. Under current law, FAR maxes out at 12 times the size of the lot, but those same rules don’t apply to commercial buildings. The existing law would leave empty floors in any large commercial building converted to housing.

She has a plan to expand tax incentives that could make it easier for landlords and homeowners to turn basements, garages and other “accessory dwelling units” into code-compliant homes. The effort to build legal ADUs has turned out to be extremely expensive for owners.

And she proposed extending the timeline for developers to complete projects with income-restricted units and still qualify for property tax breaks through the 421-a program, which expired last year. The legislation would apply to buildings that have already broken ground but might not open until June 2030 — four years later than the current rules allow — and an indication of just how long new housing can take to create .

Includes reporting by David Brand.

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